Leading demographer and social commentator Bernard Salt says the broad economic, social and demographic tailwinds behind financial planning are about the best they have ever been, and the equal of any in the world.
The keynote speaker at National Australia Bank’s 2017 adviser roadshows says we are “living in the best country on earth for the next five years or 10 years or so”.
“The opportunities you’d get here are as good as anywhere, underpinned by strong levels of immigration – we’re importing 200,000 people a year – and add onto that natural increases of about 350,000 people a year, and building and construction and infrastructure and retail should all be expanding, in every city and every suburb. Generally that’s the case. It washes across Australia,” Salt says.
“If you were in financial planning in Germany or Japan or France, you would not have the underpinning that you’ve got here. That is quite a tailwind.”
Focus on Generation X
Greg Miller, NAB’s executive general manager of wealth advice, says demographics will play an integral role in defining new markets for advice, new approaches to delivering advice to those markets, and new investment opportunities for clients – including more tightly integrating residential property investments into an overall portfolio.
Miller says that while baby boomers have dominated advisers’ books in recent years, “we’ve got these generations coming behind”.
“One of the things we talk about is the growing wealth of Generation X,” Miller says. “Whilst right now it’s not exactly the same as baby boomers, some of them have still got 20 years in the workforce and some of these people have had Superannuation Guarantee all their lives. You see that wave of money coming though, and it certainly seems more than possible that Generation X will have greater wealth as they go through the next 20 years than baby boomers.
“We’re really pointing out to advisers, look out for this Generation X, and [find out] what you have to do to connect into Generation X. Some of them will be children, maybe, of your baby boomer [clients], but it’s about how you position yourself to be able to attract those clients.”
Miller says the shifting demographic gives rise to new investment opportunities and strategies. He says that investing in super will remain central and, in any case, is compulsory for many, “but what we think is happening, and what clients are saying is, ‘Well, superannuation is fine, but I want to start investing outside superannuation.’ ”
One response, he says, is to offer more managed fund and direct equity solutions, but increasingly it also means providing ways to invest in residential property. That’s not necessarily about specific property recommendations, he says.
Property, data and the adviser’s role
“There are two parts we think advisers can play. One is helping [clients] arrange their lending in a proper and prudent way. There are a few things the financial planner brings to that. One is structuring, another is working out through cash flow, and so on, not what you can borrow, but what you should borrow, and there’s a difference between those two things.
“And the other component we’re working on, that is part of our longer-term development plan, is how we help advisers do better reporting about investment properties in their overall portfolio. We can see some ways where we can help advisers get more information about the property on an ongoing basis – about valuations, costs in the area, and income – and putting that inside the portfolio for the client then allows the adviser to talk abut their total income and asset needs and work through the various decisions.
“Clients can certainly go and think about property, and go and get loans, but who builds it into a portfolio and properly manages it in a portfolio sense? That’s the role we think advisers can play.”
Miller says NAB is working with IRESS to get the technology vendor’s industry-standard Xplan financial planning software “in a better way for advisers, to make it more efficient for advisers”.
“That’s partly around advice production, data movement, those sorts of things,” he says.
“We also believe we can help with efficiency around data integration, so we’re talking about data feeds, not only from our platforms and products, but also around property. It’s a work in progress.”
Miller says all of the strategic decisions are underpinned by demographic trends and emerging advice markets. He says the aim of the roadshows is to” give advisers an understanding of the basics of demographics and where that may head”.
“Understand where we’re going, understand why demographics are important, and then we’ll help you apply some of that and add strategies to your business,” he says.
Housing and home development drive bright outlook
Salt says businesses in different states and cities are performing differently, according to short-term local conditions, but the longer-term outlook remains positive across the country.
“My argument is that regardless of whether there’s been a collapse in the mining boom and there are energy problems in Perth and Adelaide, Australia is the most dynamic, changeable market on earth in terms of consumer influences, because of a strong ethnic influence,” he says. “Not only does that drive demand for housing, which means more plumbers, electricians, tradies who should be clients, it also shifts our consumer tastes and preferences.
“[For example, people upgrade their houses]. You know, [we get] four bedrooms, two bathrooms, we have the latest fittings and furnishings and appliances – which is good for the Harvey Normans and Bunnings of the world, those home aspirational-type businesses. [You’ll see that] in every city. The people who run the equivalent of a Harvey Norman or a Bunnings should be your clients, basically, because they are prospering on the basis of something that is quite inherent to the Australian community.”
Salt says Australia has a stable middle- and upper-income demographic that will also underpin the health of advice businesses. He says there are about 200,000 individuals earning more than $250,000 a year.
“If you get to earn $250,000 a year, then you’re likely to stay there for a while,” he says.
“It’s a matter of finding out, are these earners professionals? Are they business owners? Are they well-to-do tradies – which could well be the case. Wealth washes down from the absolute top, from the rich list. But that’s not your market. Your market is well-to-do tradies, well-to-do suburban professionals and entrepreneurs.
Salt says that despite the overwhelmingly positive outlook, it is not uncommon for industries and sectors to believe they are doing it tough. Financial planning, bombarded by negative press and beset by seemingly constant legislative change, is clearly no exception.
“I speak 120 times a year, and this time it’s for the financial planning industry,” he says. “I can turn up to agribusiness, I can turn up to manufacturing, I can turn up to infrastructure, I can turn up to government administration, and they’ll all say ‘It’s a particularly bad time for us at the moment, we’re doing it tough.’ Everyone thinks they’re doing it tough.
“I’m saying, get up high, look at the bigger picture and think about how we compare with other countries. How we compare with other times in Australian history? OK, maybe the run-up to the 2008 global financial crisis was a more prosperous time, but it ended in disaster, didn’t it? It is tough, particularly in different markets, but in a broader sense we are still a lucky country, I think, and you wouldn’t want to be in business anywhere else.”
